debt consolidation

[ detkuhn-sol-i-dey-shuhn ]
/ ˈdɛt kən sɒl ɪˌdeɪ ʃən /
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noun Finance.
the combining of several smaller loans into a single new loan in order to obtain better terms, as a lower interest rate.
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Origin of debt consolidation

First recorded in 1925–30

Words nearby debt consolidation

Dictionary.com Unabridged Based on the Random House Unabridged Dictionary, © Random House, Inc. 2023


What does debt consolidation mean in credit management?

In a debt consolidation, a borrower combines several smaller loans into a single new loan, in order to obtain better terms, such as a lower interest rate. The borrower uses the new loan to pay off the smaller ones. Some borrowers may also be motivated to consolidate debt to make it easier to keep track of a single loan in place of several smaller ones.

In some cases debt consolidation can increase financial risks, for example, when an individual takes out a secured loan backed by their home as collateral in order to pay off several credit card debts, which are typically unsecured debts. This will put the home at risk of being seized to pay off the new loan if the individual is unable for any reason to make repayments.

The term consolidation can also apply to combining several financial accounts into a single one, as when the financial results from two or more businesses are combined into a single statement. In a corporate consolidation, two or more businesses are merged into a single corporate entity.

Examples of debt consolidation in a sentence

“Debt consolidation can make it easier for you to manage multiple debts while giving you the opportunity to secure lower interest rates and lower monthly payments.”
—”What Is Debt Consolidation (And Does It Make Sense For You)?” Rocket Loans. Retrieved March 15, 2020.

“If you’re really serious in your quest to get out of credit card debt, you might want to consider debt consolidation, a method designed to lower your payments by giving you a lower interest rate.”
—”How To Recover From Holiday Credit Card Debt” Rocket Loans. Retrieved March 15, 2020.

“Debt consolidation loans are typically unsecured, meaning they don’t require collateral.”
—”How to get a debt consolidation loan with bad credit” Bankrate. July 24, 2020.

Other terms connected with the topic of debt consolidation

How to use debt consolidation in a sentence